Abstract
Trade promotions are complex marketing agreements between a retailer and a manufacturer aiming to drive up sales. The retailer proposes numerous sales promotions that the manufacturer partially supports through discounts and deductions. In the Portuguese consumer packaged goods (CPG) sector, the proportion of price-promoted sales to regular-priced sales has increased significantly, making proper promotional planning crucial in ensuring manufacturer margins. In this context, a decision support system was developed to aid in the promotional planning process of two key product categories of a Portuguese CPG manufacturer. This system allows the manufacturer’s commercial team to plan and simulate promotional scenarios to better evaluate a proposed trade promotion and negotiate its terms. The simulation is powered by multiple gradient boosting machine models that estimate sales for a given promotion based solely on the scarce data available to the manufacturer.
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Notes
- 1.
Store brand products, also called own brand products, are produced by a manufacturer for resale under a brand controlled by a retailer.
- 2.
Retailers deduct from the manufacturer’s invoice a compensation for their promotional or advertising efforts that the retailer believes to be just compensation.
- 3.
For example: “Extra Virgin Olive Oil”.
- 4.
For example: “Pamphlet: “fill up your pantry”: 35% discount on a selection of gourmet Brand A olive oil”.
- 5.
- 6.
Vilfredo Pareto, a famous Italian polymath, coined the Pareto principle after observing that 80% of Italian land was owned by 20% of its population. The principle essentially states that a minority of agents bring about a majority of consequences.
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Viana, D.B., Oliveira, B.B. (2023). The Art of the Deal: Machine Learning Based Trade Promotion Evaluation. In: Almeida, J.P., Geraldes, C.S., Lopes, I.C., Moniz, S., Oliveira, J.F., Pinto, A.A. (eds) Operational Research. IO 2021. Springer Proceedings in Mathematics & Statistics, vol 411. Springer, Cham. https://doi.org/10.1007/978-3-031-20788-4_15
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